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WORLD TRADE
G/TBT/W/317
15 June 2009
ORGANIZATION
(09-2906)
Committee on Technical Barriers to Trade
Original: English
THE IMPORTANCE OF REGULATORY COOPERATION FOR IMPROVING
GOVERNMENTS’ ABILITY TO FULFIL LEGITIMATE POLICY OBJECTIVES WHILE
FACILITATING TRADE: THE NORTH AMERICAN EXPERIENCE
Communication from Canada, Mexico, and the United States
The following communication, dated 8 June 2009, is being circulated at the request of the
delegation of the United States.
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I.
INTRODUCTION
1. Effective integration of global markets not only requires the elimination of tariff duties but nontariff barriers as well, including where possible, the elimination of undue differences in standards,
technical regulations, and conformity assessment procedures.
2. In 1999, an OECD study referenced an estimate that 80 percent of trade is affected by standards
or associated technical regulations.1 An empirical study completed by trade economists in 2004
estimated that the global gains from the removal of non-tariff barriers could be in excess of $90
billion.2 Thus, we believe that the use of regulatory cooperation to reduce such barriers is critical.3
3. While recommending the implementation of regulatory cooperation mechanisms as a means for
facilitating trade, it is important to bear in mind that there is no “one size fits all” approach. In other
words, there are many ways and degrees to achieve regulatory cooperation among trading partners:
from information-sharing to harmonization of standards and regulations, to equivalence and mutual
recognition agreements. Some of these different approaches are reflected directly or indirectly in
Articles 2.4, 2.6, 2.7, 2.8, 3.4, 5.4, 6, and 9 and Annex 3 of the Agreement on Technical Barriers to
Trade (TBT Agreement).
II.
BACKGROUND
4. In the Fourth Triennial Review, Members noted that:
“Regulatory cooperation between regulators from different Members, whether informal or
formal in nature, and including training activities, can help achieve a better understanding of
different regulatory systems and approaches to addressing identified needs. Furthermore, it
1
OECD, Regulatory Reform and International Standardization, TD/TC/WP (98) 36, January 1999.
Andriamananjara, S., et al. (2004), “The Effects of Non-Tariff Measures on Prices, Trade, and
Welfare: CGE Implementation of Policy-Based Price Comparisons,” U.S. International Trade Commission
(USITC), Office of Economics Working Paper EC2004-04-A, Washington, D.C.: USITC, p. 18.
3
Enhancing Competitiveness in Canada, Mexico, and the United States: Private-sector Priorities for
the Security and Prosperity Partnership of North America (SPP), Initial Recommendations of the North
American Competitiveness Council, February 2007, p. 29.
2
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can promote regulatory convergence, harmonization, mutual recognition and equivalency,
thereby contributing to the avoidance of unnecessary regulatory differences and to the
reduction of unnecessary barriers to trade.”4
Further, Members agreed to share experiences on “how regulatory cooperation between Members has
contributed to the avoidance of unnecessary regulatory differences.”5 It is in that context that Canada,
Mexico, and the United States have prepared this paper for discussion by the Committee.
5. In 1993, the three countries signed the North American Free Trade Agreement (NAFTA), which
took the region to the leading edge of trade and investment liberalization globally. The result has been
hugely positive for all three countries. Since its implementation, annual trade between the three
countries has gone from $297 billion to $810 billion.6 Our countries now conduct $2.2 billion in trade
every day.7 Economic growth in all three countries has also been robust, with the real gross domestic
product (GDP) rising over this period by 40 percent in Mexico, 48 percent in the United States, and
49 percent in Canada.8
6. However, despite this impressive growth in trade, non-tariff barriers affect approximately $715
billion of North American trade.9 In order to address such barriers, Canada, Mexico and the United
States have long acknowledged the positive effects of improved trilateral regulatory cooperation,
which acts to lower costs for North American businesses, producers, governments and consumers;
maximize trade in goods and services across North American borders; and protect health, safety, and
the environment.
7. Trilateral regulatory cooperation has taken many forms over the years, either in a regulator-toregulator format or within a more structured framework. The best known of these frameworks is the
NAFTA which, since 1993, has offered a forum for cooperation in several specific areas, including
pesticides, agriculture, automotive goods, and telecommunications. More recently, in March 2005,
the Leaders of Canada, Mexico and United States launched a Regulatory Cooperation Framework
(RCF) within the context of the Security and Prosperity Partnership of North America, with three
general goals:
(a)
To strengthen regulatory cooperation, including at the outset of the regulatory
process;
(b)
To streamline regulations and regulatory processes; and
(c)
To encourage compatibility of regulations, promote the use or adoption of relevant
international standards in regulations, and eliminate redundant testing and
certification requirements, consistent with our WTO obligations.
8. Sections C and D of this paper set out some examples of regulatory cooperation under NAFTA,
the RCF, and other fora. In Section E, we attempt to draw some conclusions from these activities and
provide recommendations to the Committee for further work in this area.
4
Fourth Triennial Review of the Operation and Implementation of the Agreement on Technical
Barriers to Trade Under Article 15.4, G/TBT/19, 14 November 2006, para. 18.
5
Id. at para. 19(h).
6
Enhancing Competitiveness in Canada, Mexico, and the United States, February 2007, p. 12.
7
Ibid.
8
Ibid.
9
Chen Maggie Xiaoyang, Tsune Otsuki, John S. Wilson, “Do Standards Matter for Export Success?”
Policy Research Working Paper 3809, World Bank, Washington, D.C., 2004
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III.
REGULATORY COOPERATION ON SYSTEMIC ISSUES
A.
COMMON REGULATORY PRINCIPLES AND BEST PRACTICES
9. Under the RCF, Canada, Mexico, and the United States agreed to a set of common regulatory
principles to guide North American regulators during regulatory development.10 These common
principles are rooted in WTO rules and mirror closely OECD principles. They include minimizing
the adverse impact of regulations on fair and competitive market economies; minimizing unnecessary
duplicative requirements within North America; identifying alternatives to addressing a regulatory
need, including non-regulatory options; and ensuring transparent regulatory development and
implementation. In light of these principles, Canada, Mexico and the United States established a list
of illustrative best practices that provide concrete guidance, in each of the three countries, on how to
achieve our common principles.11 These best practices encompass government efforts to streamline
the regulatory process, increase the use of regulatory impact assessment, and improve transparency
through effective consultations throughout the process.
B.
RISK IMPACT ANALYSIS
10. Under the RCF, Canada, Mexico, and the United States also established a trilateral forum on
Regulatory Impact Analysis (RIA), which brings together regulatory policy experts from the three
countries to strengthen collaboration on procedures, practices, and tools which underpin new
regulatory proposals. In 2008, this forum undertook a trilateral review of an existing U.S. Department
of Transportation RIA on electronic stability control for motor vehicles, allowing Canada and Mexico
the opportunity to provide comments on the U.S. analysis. This joint pilot project also allowed
representatives from regulatory agencies and departments, as well as representatives from central
agencies responsible for regulatory policy in the three countries, to discuss the similarities and
differences of the regulatory analytical requirements and the methodology used in each country. The
joint analysis was very instructive and will be replicated in the future. We believe that such analytical
work and dialogue are key for the development of compatible approaches to technical regulations.
IV.
REGULATORY COOPERATION ON SECTOR-SPECIFIC ISSUES
A.
FOOD AND AGRICULTURE
11. In the food and agricultural sector, Canada, Mexico, and the United States have been cooperating
for many years to improve sector-related regulations and practices. NAFTA technical working groups
(TWGs) have been established for issues such as food labelling and packaging, and TWGs and
forums such as the North American Biotechnology Initiative play a significant role in regulatory
cooperation in this sector. In these TWGs and other forums, Canada, Mexico, and the United States
have collaborated on numerous regulatory projects. For example:
(a)
Laboratories: We have enhanced food laboratory cooperation between the three
countries by: (1) establishing a procedure/mechanism to share information on
laboratory methods, and (2) exchanging information on proficiency testing programs
in each country, and identifying gaps where programs are not available.
(b)
Nutritional labelling: The three countries have agreed on a harmonized approach to
the scientific basis used to update dietary reference values for the labelling of food
products.
10
See http://www.spp.gov/docs/RCF_Common_Regulatory_Principles_Inventory_Best_Practices_
FINAL.doc
11
Ibid.
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12. Bilateral work in this sector also continues. For example:
B.
(a)
Organic products: Negotiations between Canada and the United States to reach an
equivalency agreement on organic requirements began in February 2008, and the goal
for both countries is to complete the negotiation as soon as possible.
(b)
Tequila: The United States and Mexico concluded an Agreement on Trade in Tequila
in January 2006. The Agreement established a set of rights and obligations for the
parties to protect tequila as a distinctive product of Mexico and to minimize barriers
to the export of tequila to the United States. The Agreement also created a Working
Group on Tequila in which representatives of the relevant agencies in the United
States and Mexico monitor the implementation of the agreement and exchange
information and statistics on tequila trade.
AUTOMOBILES
13. Canada, Mexico, and the United States are undertaking several joint activities with the goal of
reducing air pollution and greenhouse gas emissions from vehicles and engines and ensuring that
significantly cleaner vehicles and fuels are marketed throughout North America while enhancing
regulatory cooperation among the three countries.
(a)
We have shared information on policies and programs on vehicle fuel efficiency,
standby power consumption, and the potential for natural gas to support optimal
energy use for the future.
(b)
We undertook a comprehensive analysis of various emissions inventories among the
three countries to prepare a trilateral strategy to achieve comparability.
(c)
Additional candidate areas for cooperation could include such things as the exchange
of information on vehicle and engine testing, as well as sharing information on the
development and use of voluntary partnerships for in-use fleet emission reductions.
This initiative will be an iterative process of engagement and will build upon existing
formal and informal mechanisms. For example, the U.S. EPA hosted a workshop in
Washington in June 2008 to share information with Canadian federal and provincial
government representatives on strategies and approaches to reduce emissions from
heavy duty vehicles that are already on the roads; and EPA hosted the Border 2012
Air Policy Forum (APF) meeting with Mexico in San Diego, California in July 2008,
to adopt an emissions reduction strategy, which includes approaches specific to
vehicle emissions in the Border States. EPA is currently undertaking a feasibility
study on incorporating anti-idling mechanisms in the plans for a new border crossing
near San Diego, which will be presented at the August Border 2012 APF meeting in
Monterrey, Nuevo León, México. Simultaneously, EPA has begun discussions with
the U.S. Departments of State, Transportation, Homeland Security, and Commerce
with regard to anti-idling options for the new crossing. EPA is conducting and
supporting numerous other transportation emissions reduction projects, including
diesel retrofits, along the border as part of the Border 2012 APF Strategy.
(d)
Finally, the National Research Council Institute for National Measurement Standards
(NRC-INMS) and the Mexican Ministry of Environment and Natural Resources
(SEMARNAT) will exchange information on advanced techniques for measuring
automotive air emissions such as carbon dioxide, carbon monoxide, nitrogen oxides
and unburned hydrocarbons with the U.S. National Institute of Standards and
Technology (NIST). NIST and NRC-INMS have also agreed to an exchange of
visits, and NIST gas analysis experts visited the Environment Canada Environmental
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Science and Technology Centre (EC-ESTC) labs in November 2008 to exchange
information on measurement techniques.
C.
CHEMICALS
14. Canada, Mexico, and the United States have developed a trilateral approach to fully apply the
results of ongoing efforts to assess, prioritize, and take action on existing chemicals in the United
States, Canada’s Chemicals Management Plan, updated information on inventories, and Mexican
efforts to develop a chemical inventory and implement international objectives, to achieve the
following by 2020:
(a)
establishing or updating inventories of chemicals in commerce in all three countries;
(b)
enhanced capacity in Mexico to assess and manage chemicals; and
(c)
sound management of chemicals in North America as articulated by the World
Summit on Sustainable Development Johannesburg Plan of Implementation and
reinforced by the Strategic Approach to International Chemicals Management.
These efforts will contribute to improving our health and environmental protection programs through
a practical and focused approach to strengthen chemical management in North America over the long
term.
D.
ENERGY
15. In July 2007, the three countries reached a trilateral agreement on energy science and technology
– a framework designed to stimulate innovation and to share and help build capacity in all three
countries. Ministers emphasized that developing cleaner and more efficient ways to produce and use
conventional energy and advancing our knowledge of renewable energy, science and technology were
fundamental to increasing energy security, sustaining economic prosperity, and protecting the
environment, and that greater regulatory cooperation increased the potential return on investment in
energy science and technology.
16. In the area of energy efficiency standards, three energy performance standards have been
harmonized across the three countries: freezers and refrigerators, three-phase motors, and room air
conditioners. The new suite of products was assessed under the new framework to systematize energy
efficiency harmonization between the three countries. Workshops have also been held on Standby
Power and Transportation Efficiency. There is also a commitment to further align energy efficiency
standards on key consumer products, and agreements to identify specific ways to increase cooperation
on research and development and reduce barriers to deployment of new technologies in a wide variety
of areas, including biofuels, gas hydrates, hydrogen, carbon capture and storage, clean coal, and
electricity transmission.
17. We have also road tested emissions estimation methodologies for nine energy generating facilities
to improve and harmonize emissions calculations in the energy power sector and provide the basis to
populate and update power sector emissions inventories.
18. In short, the NAFTA approach to regulatory cooperation emphasizes the importance of regulatory
convergence (including reduction of regulatory inconsistencies and redundancies), administrative
simplification, and the use of practical, science- and risk-based tools, to attain critical health, safety,
environmental, and security goals in the least trade-restrictive manner possible. Such an approach
enables the NAFTA partners to effectively attain their legitimate regulatory objectives in a manner
that reduces rather than increases the burden on businesses and international trade.
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V.
CONCLUSIONS AND RECOMMENDATIONS
19. The cooperative activities illustrated in this paper demonstrate the wide variety of approaches that
can be employed by regulators to collaborate with each other -- from simple information sharing to
negotiating equivalency agreements, always bearing in mind their obligations under the WTO TBT
Agreement. The appropriate approaches in any given situation will necessarily differ based on a
number of factors. The availability of resources, the degree of regulation already in place, and the
level of technical and institutional capacity in each country are factors to consider. Canada, Mexico,
and the United States are cooperating and coordinating successfully, taking into account these types
of constraints, in the context of North American regulatory cooperation activities. We believe that
our efforts have provided substantial benefits to regulators, suppliers, and the public.
20. For regulators, cooperation has improved access to shared information and to alternative
approaches to addressing common problems and objectives. In some cases, cooperation has
economized on critical staff time and resources, and enabled more rapid responses when regulatory
action is needed. Regulatory cooperation also has enabled trade facilitation to be a key factor in
evaluating alternative approaches to achieving legitimate policy objectives. For example, sharing
international best practices through regulatory forums has provided global benefits in terms of
opportunities to improve product safety, as well as consumers’ confidence in products, their national
regulators, and the global trading system.
21. In addition to leading to better regulations in North America, cooperation has reduced the costs of
suppliers of dealing with unnecessary divergences in regulations. Harmonizing divergent regulatory
approaches designed to achieve the same objective, while not lowering the level of protection of, e.g.,
the environment, health and safety, and consumers, simplifies the compliance process for suppliers.
This will enable suppliers with operations located both inside and outside North America to reduce
their costs of regulatory compliance, generate greater economies of scale, increase sales, and pass on
cost savings to consumers.
22. Regulatory convergence is especially beneficial for small and medium sized enterprises (SMEs).
SMEs, which account for tens of millions of jobs in North America and are a major source of
innovation, necessarily devote a larger percentage of their operating budgets to regulatory compliance
than do large enterprises, so they are particularly impacted by having to comply with a multitude of
regulations across different jurisdictions.
23. The North American economic integration achieved through NAFTA over the past decade and a
half has brought significant benefits to our citizens. Canada, Mexico, and the United States believe
that our regulatory cooperation efforts have been an effective catalyst for achieving a more fully
integrated North America market, and we intend to apply the lessons learned from our NAFTA efforts
in other sectors. We invite other Members who have an interest in regulatory cooperation in any of
the areas set out in this paper (or in other areas, for that matter) to discuss that interest with our
delegations.
24. We also recommend that the Committee invite other Members to share their views and
experiences on regulatory cooperation, with the goal of identifying areas where WTO Members can
work together to achieve convergence on well-crafted, risk- and science- based, non-discriminatory,
and transparent, regulatory approaches, with a goal of harmonization where possible. We recommend
that the Committee hold a Workshop on Regulatory Cooperation to facilitate this information-sharing
process.
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